April is tax season, so a lot of people are thinking about their finances these days. But if you're like most people, you're probably thinking in the short term: What's my refund going to be-or how much do I owe? And what is that going to do to my monthly budget?
It's good to be thinking about those things. It's also important to look at the bigger picture. Financial Literacy Month, which is also in April, gives you the perfect chance to do just that. Surveys have showed that an alarming number of Americans lack even basic financial knowledge; in an era when we collectively have trillions of dollars in consumer debt, and many people live paycheck to paycheck, that can be a recipe for disaster. But it doesn't have to be that way! This Financial Literacy Month website, created by nonprofit credit-counseling firm Money Management International, features tools and resources to help you understand your finances better and build a bright financial future. In that spirit, we've come up with seven tips that can help you become more savvy with your money. Some are easy things you can do today. Others might take a little more work. But all are worth the effort!
- Make your saving automatic. It's important to have money set aside for emergencies-and to save for retirement. But once your paycheck hits your account, it can be a lot easier to just spend it all. The solution? Schedule automatic transfers to a separate account for your emergency fund, your retirement plan, or both. Start with something like 10%. You might even find that you don't miss it.
- Pay your credit cards off every month. If you can't do this now, pay them down until you can. One popular way is the "snowball" method, which in a nutshell, works like this: Make only the minimum payment on all of your debts-except the smallest one. Put as much money as you can toward that. When the smallest debt is paid off, repeat the process and continue until everything is paid!
- Check your tax withholding. People love getting big tax refunds, but that really means you've loaned the government your money over the course of the year-interest-free. For example, instead of a $2,500 refund in April or May, you could have more than $200 extra in your paycheck every single month. Wouldn't that be nice?
- Don't throw away free money. Who would do that? Well, you-if your employer offers a match on your retirement savings and you don't contribute enough to get the full amount. Say your company matches the first 3% of salary you contribute to a 401(k); you should save as much as you can, but at the very least, you'd want to save that 3%.
- Pay less for services. Are you paying more than you should for cable, internet or your mobile service? Maybe not-but you won't know unless you ask. Often, companies have discounts or special packages available, especially if you're a loyal customer and you haven't been on a promotional deal for a while.
- Consider a credit card that rewards you. This can be a great way to earn points toward free travel or other rewards, just for buying the things you would buy anyway. Don't spend more than you normally would just to get rewards, though. And remember, if you regularly carry a balance, the rewards probably won't outweigh the interest you're paying. (Go back to item #2 in our list.)
- Track your spending for a while-and then review it. You probably spend money on a lot of little things without realizing how much it adds up. Maybe you get takeout for lunch a couple of times a week, or stop for coffee every day on your way to work. Try tracking everything you spend for a month or two. Then, take a look at your habits.
You'll find areas where you can save, likely without even feeling like you're making a sacrifice. Insurance is an important tool for your financial well-being, too. Even though it's easy to think of insuring your car or home as protecting your "stuff," insurance really protects your finances. After all, insurance can't prevent your car from being hit by another driver-but it can pay for the repairs, so that money doesn't come from your pocket.
Take a little time to think about your finances this month, and try one or more of the tips above. As with many things in life, when it comes to money, small steps can have a big impact!